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Our Best Export – Our Taxes!

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By Tom Yamachika, President
(For Release 2/22/15)

In our legislature, it looks like policy makers love surcharges on our General Excise Tax. There are bills to extend the existing Oahu county surcharge to pay for rail in perpetuity. There are bills to establish another surcharge to fund a defined benefit plan to pay for long-term care. Why do lawmakers so desperately want to pile on the GET? One reason is they have heard that some of that tax is exported. We are fortunate to attract lots of visitors to our islands. They probably don’t pay our income tax, but they do pay the GET just like any other consumer in Hawaii. So they help pay for our government, and to that extent the rest of us don’t have to. Isn’t that a great export?

Many of our policy makers have heard, apparently based on research that was done some time ago, that visitors pay about a third of our GET. We wondered how good a number that is today, so we came up with some current numbers.

First we look at the Oahu county surcharge. HART wants the current surcharge to be extended forever because they see it, at least in part, as a way to get our visitors to subsidize the operating costs of rail.

We took the Hawaii Tourism Authority’s tally on visitor spending on Oahu, and multiplied by 0.5%, the surcharge rate. There is some visitor spending that’s not subject to the surcharge, interisland air fare and helicopter tours as examples, but the data indicated that the effect of these activities is minimal.

Next we pulled the Department of Taxation’s collection reports and compared that calculated number with the total county surcharge collections by year.

We did this calculation for calendar 2013 and back a couple of years for comparison.

2013

2012

2011

Total Visitor Expenditures (all data in $mil)

14,520.5

14,364.8

12,254.6

Total Visitor Expenditures in Honolulu

7,358.7

7,672.5

6,351.4

Oahu Surcharge on Visitor Spending = 0.5%

36.8

38.4

31.8

Oahu Surcharge Collections

236.6

181.6

219.6

Oahu Surch. on Visitor Spending as % of All Surch.

15.55%

21.13%

14.46%

Source: HTA, DOTAX, Tax Foundation of Hawaii calculations

We then took a look at data for the GET generally.

2013

2012

2011

Total Visitor Expenditures (all data in $mil)

14,520.5

14,364.8

12,254.6

GET on Visitor Spending = 4%

580.8

574.6

490.2

GET Collections

2,907.6

2,844.7

2,588.5

GET on Visitor Spending as a % of All GET

19.98%

20.20%

18.94%

Source: HTA, DOTAX, Tax Foundation of Hawaii calculations

This data indicates that we are exporting around 15%-20% of our general excise tax, again better than nothing but it’s a bit shy of a third.

This is hardly surprising. The previous estimate of exported tax apparently was made at a time when visitor counts were up and the economy was better. Since then we’ve added two points to the transient accommodations tax and jacked up the charges on rental vehicles, among other tourist-related assessments. Leisure travel is a discretionary expense for people, not a necessity. So if it’s too expensive they won’t travel, or if they do travel they’ll go elsewhere. If they don’t come, we can’t export our tax burden to them. So if we pile more and more surcharges on our GET, we can expect more of a burden to bear and less help from our visitors.

 

Editor’s Note:  Here is a sheet showing additional years we calculated with this methodology.  Export Taxes Data

The government agencies are relying on a report prepared for the 2005-2007 Tax Review Commission by the Tax Research and Planning Office, Department of Taxation, which asserted that 38% of the General Excise Tax is “born[e] by tourists, nonresident military personnel,  and the federal government.”  It’s quite possible that a large part of the difference between this figure and the one we calculated is in the definition of the base.  We focused on tourists only.

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  1. […] Foundation came up with its own estimates using calculations from Hawaii Tourism Authority and Department of Taxation data for 2011-2013, and […]

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